tv Worldwide Exchange CNBC June 5, 2013 4:00am-6:01am EDT
you're watching "worldwide exchange." i'm ross westgate. the headlines today. shinzo abe's third arrow fails to hit a bullseye with investors. the nikkei down with a reform plan high on ambition but very low on specifics. the top fed official says it's time for the central bank to re-evaluate its bond-buying program. the comments come as deutsche bank's co-ceo's told cnbc the bank is preparing for the end of qe-3. >> we are going to higher u.s. growth than many of our peers, and as a consequence, we're also calling for an end to the bond-buying program that's happening maybe as soon as the
end of 2013, latest fiscal 2014. beijing strikes back to the eu over solar import tax, announcing an antidumping program into european wine. german solar stocks wide as brussels' trade commissioner tells cnbc he's aiming to create a level playing field. >> the equation that we have been making is that if we do not intervene, then the solar industry will disappear in europe. >> and samsung scores a victory in its long-running fight with apple as a key u.s. agency slaps a ban on the import and sale of older iphones and ipads. all right, a warm welcome to today's program. we kick off with the latest pmis out of the eu and the eurozone, indeed.
let's bring you that. the service pmi, 47.2, a slight tickdown from the flash of 47.5, but the composite number has remained the same, 47.7. that was the flash bigger as well. joining us with thoughts and insights is chris williamson, the chief economist who helped compile these numbers. chris, where does this leave us in terms of relation to the gdp forecast? >> well, it's suggesting that eurozone's got another quarter of contraction on its hands at the moment, second consecutive quarter. we're looking at probably 0.2%, so it's nothing like as severe as we saw in 2008-2009, but there's a sheer sense that this recession is now just dragging on, and it's hard to see what's going to pull us out of it. earlier in the year, germany seemed to be growing at a strong rate and that was raising hopes that we'd get some growth drivers there that would pull the whole region out of its downturn by middle of this year. that's obviously not happening. we're in june already. and i think we're still a long
way off that stabilization. >> ecb tomorrow, are we going to get further reaction to the fact that this is going to be just long, slow, drawn out, as you say? >> i think so, yes. now, draghi said they'd be ready to act if the economic communicators deteriorated. there's some confusion to what that actually means. does it mean the pmi numbers have to fall from where they are at the moment or just signal continuing decline, which they are doing at the moment? i think they're going to look at these numbers and say, well, they're signaling the easing rate of decline, the second order is improving in them, so let's wait and see. things are on course. it's just taking a little longer than they thought, things stabilizing by the end of the year. >> all right, chris, you're with us the first half of the show. we're working towards the surface numbers, pmi numbers out of the uk as well. you'll be around for that. also, we'll be on the ground in istanbul as protests have poured into a six day. the government admitted excessive force was used against demonstrators that initially have sparked the latest bouts of
violence. former news international chief rebekah brooks is set to enter a plea to criminal charges tied to the phone-hacking scandal. we'll bring you a preview from outside the london court in just a few minutes. and unilever's due to invest hundreds of millions in myanmar over the next decade. at 11:30 cet, we'll go for a first on cnbc interview with harish manwani. and as fed tape talk continues to influence market movements, we'll find out how one of the world's biggest money managers thinks about the end of qe. howard marks, they've got $71 billion under management, well worth listening to the man who will join us at 11 cet. first up, everything about abenomics has been big and bold, but shinzo abe's latest reform plan has failed to impress investors. the nikkei down more than 3.8% today, and not that it's lacking
ambition. the japanese prime minister's promising to raise incomes by 3% annually, triple infrastructure exports by 2020 and double farm exports in the same period. he also wants to restart nuclear reactors, allow online drug sales, move more pension fund holdings into equities and set up economic zones to boost foreign investment. what it appeared to be missing was the element of surprise since the moves were pretty well flagged in advance. kerri's in tokyo with her thoughts and analysis. >> reporter: hi, thanks a lot. we're very close to bear market territory for the equity market, just a whisper away, 13,750 is that number. this loss that we saw today, this is the fifth time in about two weeks. this speech by shinzo abe was unable to sort of reverse this down trend that's been in place for two weeks. i think the details and the specifics of the plan have been coming out in recent weeks. so, in that sense, i don't think anyone was expecting a bombshell
from the prime minister. i think people were expecting some sort of immediacy in some of the plans, and many of the numerical targets that were outlined today are targets for 2020, which seems like a long way off, even if you factor in the part that, perhaps, this government will likely win this next election in a couple weeks' time, and that means there will be no election for the next three years. but 2020 seemed to lack the sense of immediacy that maybe some investors were hoping for. having said that, i think the speech outlines and highlights the fact that we're getting into an election. in less than a month, the campaigning is likely to start, and i think this was his way of addressing some of the concerns about wage growth. i mean, here on one hand, the bank of japan is going to try and push up inflation to 2% and profitability seems to be returning because you can't underestimate the reversal in the yen that we've seen, but we've had limited numbers on the
wage front in terms of base salaries going up, although there are indications that overtime pay is starting to pick up. so, i think this question of raising income by 3% every year over the ten years is maybe some way -- is a way for the prime minister to address that and some of the concerns you're getting at the grassroots level, but for the day, it wasn't enough, it triggered the u-turn in the dollar/yen and hence a brutal sell-off in the equity market here. >> okay, thanks for that. we'll catch you again later. joining us for more from tokyo, charles beasley, ceo at niko asset management. still with me in the studio in london, chris williamson, chief economist at markit. charles, good to see you. does this suggest it's better to travel than arrive with japanese policy? >> well, ross, i think what's interesting is the execution of a political strategy that abe is discussing with his people at the moment. he's setting out his stall, he's
using repetition, which is a tactic that leaders very often employ, really to make sure that people understand what it is he's doing. i don't think he's focusing on the markets and i don't think he should be. he has the election coming up. we expect him to win it. i've said this to you in the past, pretty comfortably. and therefore, this third arrow, it appears, which is not a huge option between one and three, is going to be implemented, and i think he's just setting out his stall in a way that reagan or thatcher would have set theirs out when they were trying to get their people to understand what needs to be done. >> so, you're saying the disappoint today is not warranted? >> no, i'm not suggesting it's not warranted. traders do things for their own reasons. there's been an awful lot of, i think, froth in the market over the last month since you and i last spoke, and i suspect that quite a lot of the profits that, don't forget, were up as high as 60% year on year, now off from its high around 15%, is what you would expect to see. a lot of that i suspect is also
foreign hedge fund money that arrived in the market over the last quarter. so, we expected to see sell-offs. we didn't expect to see new news today. i don't think today was the day for it. so, i think the volatility may continue for a while now. but these may look like good entry levels over the next, for the next six to nine months. >> do you think, some people talked about we need policies to boost income from overseas assets, that needs to be part of the mix. what do you think? >> well, i've said in the past that i think that the import-export component of abe's policies are important to consider, both in terms of japan exporting capital, but also to import capital in these public-private partnerships which abe is referring to as part of his deregulation and reform act. you know, for example, there are 89 airports in japan. only three of them are profitable. you know, i think that the ability to attract foreign capital and foreign equity into these infrastructure projects will be a centerpiece.
i think it's used as an accelerant as much as anything else. >> chris, let's just bring you in here. what's your sense when you look at the pmis out of japan? has there been any impact yet on the economy or on sentiment? >> absolutely, absolutely. so, we had the manufacturing pmi out, which is at 21-month high. that's quite contentious, though, because whereas japan's seeing the strongest growth in nearly two years, the rest of asia, when you strip out japan pmi there, showed the first decline for seven months. so, that's always going to raise tensions about currency wars and so forth. so, the secret is, well, the key is that japan has to raise domestic demand. and if its own economy grows and adds to global gdp, then everyone will put up with that yen weakness. just this morning, we have the japanese services pmi out, which is at a record high. it's showing very strong growth in the domestic economy, firms taking on more stuff, firms having to pay people more as well and confidence at the highest we've seen since the crisis struck. so, there is this sense that
abenomics, and the companies themselves are telling us this is what is attributing to it. there's a feel-good factor, abenomics, they're saying. >> as far as you're saying, the survey today shows confidence is feeding through to companies investing domestically and hiring more people? >> absolutely. spending more money on marketing, investing in their expansions through buying more capital equipment and taking on more staff. so, this is a short-term increase. we're looking -- what was suggested was a 0.9%, 3.5% annualized gdp increase in the first quarter. we're suggesting that accelerated maybe to 4% annualized in the second quarter, but this is the short-term gain that pretty much everyone was expecting. these are like the two arrows. the third one is that long-term change, because what we've seen throughout the crisis, the unemployment rate span hasn't fallen -- sorry, hasn't risen much above 4%.
so, that's a sign of just these rigidities in the labor market and we need those rigidities to come down so pay growth can escalate. that needs to change, and i don't think anyone was expecting measures today to come through, so i'm a bit surprised at this continued sell-off. i think there's much longer to wait. >> charles, okay, the confidence part is starting to return. as you say, we've got to wait for the measures to be fully implemented as well. where does that leave us now, you know, over the next few months with the nikkei and the yen correlation? >> i'm really not sure if anybody has a very good answer to that, because there is a huge impact that i think these foreign capital flows have been having on the market's volatility, but what are we saying? we've said, i think, before, that you know, 15,000 is within reach and then on up, and we said that we thought the yen would trade pretty comfortably between 95 and 105 and drift up
to sort of the 120 area. you know, those are relatively long-term calls, but over the next few months, it's important to get the election out of the way. growth rates are forecast much higher. a lot of international economists were looking at japan getting sort of an anemic 0.5% growth rate as late as december last year, but now we're revising that up to 2%. profitability of companies that we talked to over here is absolutely growing, and investor confidence, i think, will improve throughout the summer as well. so, as i said earlier, i think this may turn out to be an entry point for the second wave of money. and don't forget, an awful lot of domestic investors have not yet participated in this. so, i think it's quite a lot of retail money and the fund market money to go. >> charles, always good to see you. thanks for that. charles beazley joining us from tokyo. chris sticks around. don't forget, prime minister abe has fired his third arrow, but do you think it's hitting the bull's eye or not? let us know. take our poll at cnbc.com.
at the same time, japan could be at the risk of stagflation and abegeddon, according to the ubs chief investment officer also on cnbc.com. find out why he thinks storm clouds are brewing over the land of the rising sun and what a abegeddon might look like. with all these terms as well like abenomics, abegeddon making the rounds, we want to know, what is your favorite or most hated buzz word of the market at the moment? e-mail us at firstname.lastname@example.org or tweet me. let's kick off the "global markets report" in asia. chloe's got the latest from singapore. >> yeah, we're just running out of these fancy words to put together -- abenomics, abegeddon -- at least as far as the verdict was concerned, it was very, very volatile, super volatile, but in the end, the markets shed 3.8%. it's also interesting how the
jgb yield ticked higher up to 0.8 0.86%. remember, we have a 30-year debt auction tomorrow and how that goes could be another verdict on mr. abe's abenomics. the key thing to note here is that the super longs have been selling off. and remember, despite repeated vows from the bank of japan that they intend to keep the rates down at the longer end of the curve, and this announcement only came quite recently, and that has been a big source of disappointment. i think one thing to look out for as far as why the markets sold off in such a big fashion was that they had all these fancy numerical targets, but what was really missing was people were looking out for some sort of tax relief, because as they tried to move ahead with their ambitious plans to get reform efforts moving, they actually -- they're going to raise taxes in just under a year's time, and this is what has the investment community quite nervous about the whole thing. there is also another element of the china growth story that is really not performing. take a look at shanghai and also hong kong.
that market selling off 1%. shanghai down five in a row, banks underperforming in the mainland. interesting to know how the state-run media is saying loan growth figures for may could undershoot. and remember, there was quite a bit of drainage in the money markets yesterday as well, so maybe no easing on the horizon? so, it's turning out to be quite a bit of a toxic combination. australia down 1.3%, gdp figures undershooting as well. overall, as we possibly move into a higher rate and stronger dollar environment, asia might very well underperform. past experiences have told us, 2004 and 1994. back to you. >> chloe, thanks for that. 7-2 decliners out-pacing advancers, the dow jones 100. ftse down 33 points, was up 33 points yesterday, which should have wiped out losses from the previous day. xetra dax down a third and the ftse mib up 0.4% at the moment, reports that many more will be looking for bond markets and banks over the next five years for funding. we'll talk about that later. bond markets, the tick up on
gilds. pmi will be expected to be cut to 53 in 50 minutes. we'll look at that. treasury yields 2.13%, comments coming out from fed officials, esther george fairly hawkish talking about earlier tapering. and on the currency markets, keep your eyes on dollar/yen, 99.74 is where we are at the moment. aussie/dollar back under pressure at 95.85. gdp weaker than expected for the first quarter. there was consensus of growth for 0.8% and euro/dollar at the moment 1.3079, pretty steady below that 1.31 level. protests continued in istanbul for the straight fifth night. this as u.s. vice president joe biden's call for the country's government to respect the rights of those on the streets. nbc's jim maceda has got more for us from istanbul.
jim? >> reporter: hi, ross. nice to be with you. well, nato countries, especially the united states, have expressed concerns over the police crackdown and violent protests here. as you mentioned, vice president biden said effectively yesterday that turkey doesn't have to choose between economic success and democracy, that it can have both, but that means respecting the rights of political opponents as well. the turkish government today is supposed to meet with a group of protesters and academics to discuss the future of the square behind me which is at the heart of this latest crisis. we will see whether those talks help to cool things down. meanwhile, several trade unions and civic groups have joined a growing strike in support of protesters. so, we're watching that as well to see if that gains any traction. and while it is calm this morning on the square, thousands
filled it again for the fifth night running last night. the atmosphere was festive, really, lots of singing and dancing, families came out to enjoy it. and overall, while there were a few reported clashes between protesters and riot police in istanbul and other cities, there were no new reports of deaths or serious injury. and the clashes do seem to have abated. ross? >> jim, thanks very much for that for now. we'll catch you a little later. also still to come, once in charge of writing the headlines, now she's making them. rebekah brooks, former boss of news international, is back in court. we'll have the latest after this. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business?
now, the former chief of news international is appearing in court today. karen is at the court with the details. >> reporter: thanks, ross. rebekah brooks has already arrived here at court this morning. the former boss of news international didn't give any indication of which way she intends to plead. in fact, she's very tight-lipped on the way in. i tried to have a conversation with her, but to no avail. in terms of the charges she's facing today, there are three sets of charges that relate to phone-hacking allegations, also
bribing public officials to try and access information for stories. but the other part is perverting the course of justice, and this dates back to 2011 when police investigators were conducting their investigations, trying to gather material so the allegations relate to whether court material or computers were actually hidden from the police at the time. now, there are a string of other former executives from news international also here today and from "news of the world," so, this is a very, very big court case. in fact, there are about nine defendants. we saw when rebekah brooks arrived a short time ago, she arrived with her husband, former editor of news of america and spin doctor for the prime minister. he is due to appear as well as four other workers at the now-defunct newspaper "news of the world." the allegations date back to 2002 when a teenager went missing and it's alleged that "news of the world" hacked into her voice mail in the days during her disappearance, which may have impacted the police investigation.
since then, there's been a big public fuel, the paper's been closed, but allegations persisted that perhaps the newspaper used these sorts of tactics in terms of accessing the voice mails of celebrities and also some of the royals as well. so, this story has been a very important one that's transpired across the public here. we've had the inquiry as well that went into the standards in press reporting. but we'll see today in court whether or not there is a guilty plea that will be established before a trial date in september. so, ross, we're watching the events closely and you can see there is an enormous press pack here. there is a lot of local interest in the press about the events that transpire in the courtroom here today. >> karen, thanks for that. more from karen. also still to come, we asked the $75 billion man what he thinks about the end of qe. howard marks, chairman of oak tree capital, joins us for an exclusive in just over 30 minutes. plus, uk services pmi coming up as well. we'll break that data right after this. we went out and asked people a simple question:
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ambition but low on specifics. fed official fisher says it's time for the fed to re-evaluate its bond-buying program. beijing strikes back at the eu over solar import tariffs, announcing an antidumping probe of its own into european wine. and samsung scores a victory in its long-running patent fight with apple. a key u.s. agency slaps a ban on the import and sale of older iphones and ipads. and we start off with a much stronger number again out of the uk. britain's services sector growing much faster than expected in may. new business increasing at its fastest rate in over three years. the purchasing managers index for services produced by market and the charges for supply up to 54.9% in may from 52.9% in april. 54.9% in may. we were expecting a number of 53%. it was 52.9% in april.
the figure helped by better weather boosted by a rise in new orders, which hit their highest level since february 2010. with me in the studio, chris williamson, economist at markit, who helped to compile that. it's a trifecta, chris, this week, of pmis, all above better. this is a great number from the uk. >> great, yeah. big surprise for everyone, i think. so, you've got manufacturing's growing at, well, if you look at pmi, it's getting on the fastest growth in nearly two years. you've got construction returning to growth, buoyed by the housing market stimulus in place at the moment, but this is the key one, this is the largest part of the economy, and it's showing a really strong rate of growth, but even more encouragingly is the new orders. inflows in new business are the highest we've seen since the start of 2010. so, there's good momentum there. this isn't like a one-off due to weather -- >> how sustainable is this? >> it's looking good. the business confidence readings are high, inflows of new business are good, but even more
so, what we call the backlogs of work, so the pipeline of work they've built up, that rose for the second month running. that's the first time we've had such successive rises since before the crisis. so, there's really good indications here that the service sector is gaining momentum, it's got some firm growth behind it. >> okay. european head of ethics strategy for bnp paribas, steven, what does that mean for the pound? the most important one, the services, is the best of them all. >> well, yes, certainly, that's going to be supportive for sterling, i would say both against the euro and against the dollar as well. and you know, the point we'd make here is that, particularly if you look at euro-sterling, it tends to be very cyclical and it responds to the business, the relative position of the business cycle between the uk and the eurozone. but having said that, this is an important point, we've got mark carney coming in in july, the new governor of the bank of england. he has the potential to be quite
significant as far as sterling is concerned. and the real question the market is asking is whether he's going to reignite quantitative easing program, so increase the balance sheet. now, it's interesting. you could argue, well, the data's been stronger, we have a q-1 gdp up 0.3%, the uk doesn't need it anymore. we would probably argue the opposite and say mark carney is quite an activist and he's probably -- >> steven, he's only got one vote, one vote amongst nine, and we know the mpc are quite happy to vote against their governor, even if he is new in his first meeting. >> well, that's an interesting one, isn't it? and i think the way we would answer that is to say, well, certainly, the most recent minutes showed that three members actually voted to increase the qe program. if mark carney joins that band, clearly, he would replace the governor, that would still be three, he'd only need a couple more members to come across to his camp. and our view is, it's really going to be on the strength of
the data, and particularly, this so-called exit speed of the economy. so, from our perspective, we wouldn't rule it out. >> except the strength of the data does rule it out at the moment. i mean, actually, the interesting thing is to see whether there's still three votes tomorrow for qe on the back of what we're getting. >> well, yeah, i think that's a good point, and certainly, the key numbers to focus on will be not only growth, pmis, gdp, how that's going, but also cpi. if we continue to see a weaker reading for cpi, this gives him more ammunition to go forward. so, from our perspective, don't think it's a done deal yet that qe has peaked in the uk. >> chris, is it a done deal or not? >> i think this just kills off any chance of qe you're going to see for some time. i think mark carney is going to inherit an economy already showing signs of escape velocity, as he likes to call it. it's there. we're looking around 5% gdp growth in the second quarter if we continue this. i think as you say, you know,
are there going to be three people waiting for qe tomorrow? i don't think so. >> we will find out in a couple weeks. and we wait for that with interest. okay, steven, chris, both stick around. a little bit more to talk to you as well about. let's just show you where we stabbed with european equities at the moment. sterling has risen on the back of that number, as you've seen. right now we are down a little bit more on the ftse, off 0.6%, a third lower for xetra dax, up nearly a half for the ftse mib. meanwhile, plenty of folks, of course, on japan. abe firing his third arrow. well, he sort of launched it, really. he's unveiling the latest reform plan for the country and has missed the target for investors. the nikkei down nearly 4% today. mikiko utsuda has more. >> reporter: they are reviewing the strategies of the nation's pension funds, about 190 of them together holding around $2 trillion in assets.
among them is the government pension investment fund or gpif, which is one of the world's largest institutional investors and manages around $1.2 trillion in assets. now, gpif has mainly invested in bonds, and only about 20% of its assets are in stocks, far below the average of 38% among the ten major public pension programs worldwide. investment returns are also low compared to others, so the gpif has been drawing down around $40 billion to $60 billion annually from reserves to cover growing pension benefit payouts, although the situation has improved somewhat in the last six months. now, the government plans to put together a panel of experts to discuss changes to boost its performance. for example, raising gpif stock waiting and diversifying its assets by including real estate investment trusts, commodities, futures and unlisted stocks. the panel will make their recommendations this autumn, so any changes to gpif will take up to one to two years to implement. since a massive amount of jgps
are currently held by the pension programs, a shift away from bonds may cause big waves in the already turbulent bond market. and that's all from "nikkei business report." >> makiko, thanks for that. a quick reviewer of our viewer exchange, with terms like abenomics or abegeddon making the rounds, what is your favorite or most hated buzz word? twe tweet. as for what happens to the yen, let's get back to steven. steven, we went up to sort of the high 103s and are struggling again. >> our view at the moment is what's driving the foreign exchange market is really position adjustment. and the big positions we've seen out there is long dollar/yen, and i think it's the market taking back some of that risk. it's also very correlated with what goes on in the nikkei. so, the fact that the nikkei's come off its highs is consistent
with dollar/yen coming lower as well. two points i would make going forward, however. firstly, if we continue to see a move higher in u.s. yields and market talking about tapering of qe, that will support the dollar generally. and of course, that would give a kick to dollar/yen, but also what goes on in japan. if we continue to see talk of japanese investors moving abroad, going into foreign bonds particularly, that's likely to weaken the yen as well, too. so, the bottom line for us is, near term, probably ongoing move lower in the dollar/yen, but ultimately, it's just going to be a buying opportunity and we think dollar/yen will move up about 100 again. >> okay, but then from there to where? >> well, we've got dollar/yen moving fairly steadily higher during this period of balance sheet expansion from the boj. so, certainly, we wouldn't be surprised to see it not only above 100 but maybe back towards 108 or so by year end.
>> chris, do you think -- i don't know whether you're taking dollar/yen bets, but i mean, bearing in mind, you were saying earlier that, you know, there is something more sustaining going on with the japanese economy. >> yes, but i think, you know, when you look at the long-term fundamentals behind monetary policy, japan has got at least another two years of very aggressive monetary stimulus going on there to double its monetary base. you look then at the eurozone and the uk and the u.s. and stimulus is going to start being withdrawn in all of those cases. i think there's very little likelihood of anything tomorrow for the uk or ecb. i think we're done with qe in the uk, barring any surprises. in the u.s. you've got that tapering that is imminent at some point, which leaves that weakness of the yen, i think, as the play over the long term. >> all right. good to see you. chris williamson from markit, thank you very much indeed.
steven, thank you for joining us from bnp paribas. the trade spat between china and the eu appears to be escala escalating. this follows the eu's decision to implement duties on solar imports. >> reporter: now, the latest battle in the china/eu trade spat is over solar panels. the next one may be over wine. tensions are heating up between the two very large partners as they go tit for tat, threatening an all-out trade war. european duties on chinese solar panel imports are set to take effect thursday. today china said it resolutely opposes the tariffs and is launching its own antidumping, antisubsidy probe into eu wines. a lot in trade for both countries is at stake here. china imported some 340 million liters of wine last year, more than two-thirds from the eu. europe, for its part, imported some 21 billion euros worth of solar panels from china in 2011 as a number of their own players exited the market. now, attempts to quell tensions
are having a limited effect. facing pressure from a majority of eu states which oppose the levy, the european trade commissioner reduced the tariff rate on solar panels, what he calls a "one-time offer to china," a clear incentive to negotiate, but beijing's response in the form of a retaliation on european wines, that may not have been what mr. de gucht had in mind. back to you. >> all right, thank you. speaking to cnbc following the tariff ruling, de gucht defended the decision. >> the equation that we have been making is that if we do not interve intervene, then the solar industry will disappear in europe, and i think this would be a very bad thing. what, in fact, we have to do is reinstate a level playing field by which it becomes again possible for european companies to produce in a profitable way, also allowing that the invested
research and development. that's in fact what we have to do if we follow our own rules, you know, our own regulations on antidumping, and that's what we have been doing. of course, we have also been looking at the community interest and have come to the conclusion that the best way to do this was the way that we have been deciding it, and that is the result of an investigation that has taken us nine months and that has been very intense. >> joining us with their thoughts, charles yants with clsa and james gandolfiniry, eu analyst at iahs. thank you both of you for joining us. james, put this into some context for us. how big a deal is this just in terms of trade numbers? >> yeah, i mean, look, i think talk of a trade war is premature. all right, this is the biggest antidumping investigation the eu's undertaken, but let's bear in mind, as your reporter said earlier, the value of solar
panel imports in the eu since 2011 was estimated at about 21 billion euros, but trade between the eu and china every day is well over 1 billion euros, so that helps give us perspective on this, i think. >> yes. bear in mind that perspective, then, charles, you know, what -- we get a bounce in some sort of solar stocks. i just explained what it might mean from an investment point of view. >> yeah, well, it's quite interesting. of course, any sort of antidumping tariff will have an adverse impact on demand. you know, the eu is shrinking as a share of total global solar demand. however, it's still about one-third of the demand, at least for the chinese manufacturers. ironically, it seems like it would hit the installers and the solar farm operators in europe much harder than it would hit the chinese manufacturers. >> yeah, we had a tweet from the energy minister in the uk, greg
barker. i don't know if we have a copy of that tweet, but he's denounced this decision. basically, he says what it's going to do is, it's going to have a huge impact on the downstream solar market. would you agree with that? >> well, yeah, absolutely. >> yeah, charles. >> absolutely. no, certainly. i mean, that's -- there are a lot of projects in europe now that aren't viable unless you have cheap chinese solar panels. consider that the subsidies have been coming down over the past few years and they've been coming down to reflect reductions in cost due to the lower panel prices from china. so, if suddenly you take that away, then you have a collapse in demand in a lot of markets. so, you'd have a lot of installers, you'd have a lot of jobs that suddenly disappear. >> james, this is -- i mean, 11.8% is far less than the 47% average that had been planned.
is that an indication that, clearly, you know, they're concerned about germany and its trade relationship with china? >> yeah, absolutely. i think what you're seeing here -- i mean, there's potentially two ways of interpreting it. the first is that last week, when the commission was mooting the idea of imposing 47% tariffs from today, it was deliberately leaking this figure in the hope that china would negotiate more effectively or more accommodatively with the commission. but i think what's much more likely is that germany and the other large member states who have really valuable export markets in china got very worried, partly because of chinese threats about retaliation from china, and they've heavily pressured the commission to scale back its plans. and although nominally independent, i think the commission is heavily influenced particularly by member states such as germany, and i think that's what we're seeing here. >> i mean, there is this idea -- is there any chance -- can countries block this or not at
some point? in six months when it becomes formal? >> yeah, in the long run, these are provisional tariffs. they can only run until december. after that point, there has to be a majority among member states and the council for them to go long term. and at the moment, as these surveys of government seem to show, there's really little chance of that. >> yeah, so charles, do you agree that the threat of a full-blown trade war is sort of off the agenda? >> no, i would agree with that. actually, if you look at the stock action, really the market hasn't been factoring in a full-blown trade war at all, at all. expectations in terms of demand in each of these markets do not reflect that. so, there's a bit of a relief rally. we've seen that the past couple -- well, yesterday in the u.s. and today here in asia. but beyond that, we shouldn't see a really dramatic reaction from markets. >> all right, charles, thanks
very much indeed for that from clsa and james gundri from ihs. thanks to you both. at the same time, china's service sector is still in expansionary mode but growth appears to be slowing. latest hsbc serviced pmi 51.2% in may, a little higher than the 51.1% in april. sub index fell to its lowest in 20 months. analysts say that's worrying as the service sector comprises about 40% of china's gdp. and one day after australia's central bank held off on further rate cuts, economists were presented with more disappointing growth figures. first-quarter gdp below expectations on both a quarterly and yearly basis. businesses cut back on spending with mining investment set to level off, but the treasury insists the economy will hold up. >> we have our economy in transition. we have a high dollar, which is making that transition harder, but you know, we'll see the doomsday predictions that people will have when they look at
these figures, but the reality is, the australian economy is in good shape and is handling these transitions very well. >> yeah, australian gdp, by the way, 0.6% versus expectations of 0.8%. in taiwan, smartphone maker htc gave up gains to 1% lower. chief operating officer matthew costello is stepping down, the latest in a string of high-level departures, following a chain of hiccups that have held back sales of the htc-1 smartphone, but the firm says better days lie ahead and delays are behind them. they posted nearly $1 billion revenue in may, its highest in 11 months. this is an interesting story. the international trade commission has ruled for samsung in its long-running patent dispute with apple. the agency says apple infringed on technology involving the ability of devices to transmit multiple services simultaneously through 3g wireless networks.
the itc is thereafter slapping a ban on the import and sale of older apple products, the likes of the iphone 4, iphone 3gs, iphone 2 sold in china and applies to those sold by at&t, which is the biggest u.s. seller of apple devices. when samsung filed suit in 2011. president now has 60 days to decide whether to veto the ruling. toyota's recalling 282,000 vehicles worldwide, including the prius hybrid because of a brake glitch. the automaker says default lies in the design flaw that could lead to contaminated braking fluid. nearly half of the cars will be recalled in japan, around a third from the u.s. with nearly 5,000 prius models in britain affected. plenty more on the agenda in asia tomorrow. australia reports its april trade numbers. french president francois hollande is on an official trip to japan. and two korvess to tell you
about, the foreign global forum 2013 kicks off in chengdu, china, while the world economic forum convenes in the capital of myanmar. cnbc will have coverage from both of those. we're waiting for eu gdp numbers coming up. portugal ooze just come out with its latest figures for the q-1, minus 1.4% quarter on quarter, versus minus 1.8% in the fourth quarter. all right, still to come, europe could soon be left with a labor market black hole as millions leave to find jobs elsewhere. we'll discuss the looming brain drain next. oh this is lame, investors could lose tens of thousands of dollars on their 401(k) to hidden fees. is that what you're looking for, like a hidden fee in your giant mom bag? maybe i have them... oh that's right i don't because i rolled my account over to e-trade where... woah. okay...
the eu today set to recommend latvia's membership of the eurozone in 2014, despite concerns about the nation's banking sector. last week, brussels signed off on latvia's public finances, saying it met all deficit rules. and earlier on cnbc, the pm suggested that joining the bloc would help the country's economy. >> we're dealing with our economic and financial crisis. not having euro in fact part of the problem, not part of the solution, because since our
currency's next to euro, so besides dealing with all the structural problems in the economy, we also had to defend our currency against a glut of attacks, and it's also costing the economy. meanwhile, european companies will see a mass exodus of employees over the next three years, despite improving economic conditions, according to a report by hay group. 39 million workers could quit by 2016. they're warning of a brain drain across europe with employers facing extra costs and big gaps in talent. joining good to see you. thank you very much indeed for joining us. the interesting thing is, you're not saying employees are going to leave the region, are you? you're just saying, actually, they're going to finally be able to get new jobs elsewhere? >> absolutely. one thing's very clear, there's been abnormally low employee turnover over the last few years as economies have been fairly stagnant. we think that's not because employees don't want to leave
their companies. it's just that the job markets have been slow and there's not much opportunity to do that. as the economies pick back up, we believe there will be a wave of people leaving for new jobs, which is going to catch companies by surprise. >> what's going to drive this? >> well, i mean, essentially, the pickup of the economies and the heating up of the job markets. at the moment, with economies not in great shape, if you have a job, you tend to keep it, and that means there's not a lot of turnover in employment markets, there's not a lot of volatility there. so, as those economies pick up, demand picks up, then you know, people will start to possibly bid out wages and those job markets -- >> i was going to come on to this, actually. where you have a shortage of talent, are wages going to start going up? one of the things, of course, with high unemployment levels and sluggish levels are wages are capped, but are we going to start to see a pickup in that? >> basically.
the supply and demand, if there's too much demand, especially for certain skills, that does start to bid up wages, absolutely. >> which sector's going to lead this? which sector will see the most sort of volume in terms of people switching jobs? >> well, we see the icts, it and communication sectors, professional services and health care kind of leading this and experiencing this first, retail coming behind as consumer demand obviously starts to pick up and things get better in that sector as well. >> what do employers going to have to do then to retain star staff? >> well, i think create the conditions that make people want to stay. we have a huge database of employee opinions, and those people that intend to stay with their employers for more than the next five years or so think very highly and trust in the company, trust in its strategy and direction and trust in the leaders that are taking them there. they think much better of the reward and recognition that's on offer, so that could be salary, bonus, benefits, but also just being told that you're doing a
good job. they see career opportunities, so they see that they can achieve their career ambitions if they stay with the company and there's opportunity to do that. and they feel that they can make a difference. that's particularly important, obviously, for generation x and y employees that want to make a difference in what they're doing. >> there's also, you know, firms actually have to have, you know, actually prove that they can promote talent as well. i mean, actually, you've got to say, actually, we've got to fasttrack. >> absolutely. >> not keep people down because we don't have any clearing above them. >> absolutely, and this is a lot about identifying who those people are that are, you know, liable to be the leaders of the future and getting the organizational structures right. i mean, there is a clear career path for those people and that they see that as well. no point having it if that's not obvious to employees and they're looking outside. >> ben, good to see you. ben frost, global product manager at hay group. for more on the dire predictions of europe's employee exodus, logon to cnbc.com.
you can follow us on twitter as well, @cnbcworld. the spanish parliament agreed yesterday to take subsidized cocktails off the menu after they stirred up controversy. fixed prices meant that mps could have gin and tonics, nothing wrong with a large g&t, for 3.45 euros, but that is half as cheap as at a regular bar. the government-subsidized drinks were protested as frivolous during a time when prime minister marion rajoy's government is undertaking massive spending cuts, but the cost of beer at the parliament's cafeteria will remain at 95 cents. that's the place to go and have a drink, one would think. let's just recap before we go into the break, reaction to in the last half hour, much stronger-than-expected uk services pmi coming in at well over 54. expectations of 53. that's boosted sterling up to the best levels of the day. it's pretty much also put a nail in the coffin. there we go, 1.5350.
nail in the coffin of any more qe from the bank of england for now. it follows a week of stronger pmis in both construction and manufacturing. but of course, the debates now turning to what happens with the qe program in the united states? are we getting our knickers in a twist about tapering when it starts or when it doesn't? we'll get the views of howard marks, chairman of oaktree capital. he'll be joining us for an exclusive interview throughout the next half hour on "worldwide exchange." find out why the man who runs nearly $18 billion is bullish on european corporate debt. the next hour of the program continues right after this. we went out and asked people a simple question: how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age.
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we're into the second hour of "worldwide exchange." here's a recap of the headlines. shinzo abe's third arrow fails to hit a perfect bull's eye with investors. the nikkei tumbles on a well-flagged reform plan that's high on ambition but low on specifics. a top fed official says it's time for the central bank to re-evaluate its bond-buying program. richard fisher's comments as deutsche bank's co-ceo tells cnbc the bank is preparing for the end of qe-3. >> we are calling for higher u.s. growth than many of our peers, and as a consequence, we're also calling for an end to the bond-buying program happening maybe as soon as the
end of 2013, latest first quarter 2014. that's our official forecast. samsung wins the latest round in its long-running patent dispute with apple as a key u.s. agency slaps a ban on the import and sale of older iphones and ipads. and beijing strikes back at the eu over solar import tariffs, announcing an antidumping probe of its own into european wine. the german service stocks rise as brussels' trade commissioner tells cnbc he's aiming to try and create a level playing field. >> the equation that we have been making is that if we do not intervene, then the solar industry will disappear in europe. and we kick off this hour. welcome, by the way, to the start of your global trading day, with an unrevised q-1 gdp
number for the eu, unrevised at minus 0.2% quarter on quarter. that's for the eurozone. there should be an eu number as well that was at minus 0.1%. it's worth pointing out some of the detail amongst that. we've got retail sales as well in the euro area down sharply in april. that's also important, has consumption up for the first time since the third quarter, but retail sales actually down, which -- we had this household spending up in the first three months but retail sales down suggest maybe they've already run out of steam from that. for the 0.1% in household spending was the one positive development recorded during the period. euro/dollar as a result just falling down to 1.3060, the low point for the session. it's been trading in a pretty tight range. meanwhile, away from europe,
we've been focusing on japan. everything about abenomics has been big and bold, but the latest reform plan fails to impress investors. the nikkei was down more than 3.8%, not necessarily because the plan's lacking ambition. the japanese prime minister is promising to raise incomes by 3% annually and triple infrastructure exports by 2020 and double farm exports in the same period. he also wants to restart nuclear reactors, allow online drug sales and move more pension fund holdings into equities as well as set up special economic zones to boost foreign investment. yet, what appeared to be missing was the element of surprise, since the moves were pretty well flagged in advance. joining us for more from tokyo is our very own kaori enjoji. kaori, how would you sum up the reaction? >> reporter: well, i think you first have to realize that this was not a speech made for investors, and so, you can't expect the kind of immediacy that you saw with the second
arrow, which was the monetary stimulus and the first arrow, which was fiscal stimulus. i think this was more a speech designed to outline to the public what he plans to do if they re-elect him, his party, with a landslide victory in elections next year, because this massive rally that we've seen in the equity market, despite five very rapid downturns in the last two weeks, has only created a wealth effect in a very limited part of society. i mean, only one out of five persons in japan hold a financial instrument. so, this froth is only really affecting a very small and minor part of the public. and i think some people are starting to worry about if inflation goes up to 2%, what's going to happen if my wages are not going higher? so, i think this target of 3% increase in annual wages annually over the next ten years is a part of the government's plan to try and address some of those concerns. and most of the stuff that we
got today was pretty much linked over the last couple weeks. we are getting more of the growth strategy next week and later on in the year, but i think he's starting to address the public, because this is going to be critical ahead of the election next month and the campaign will probably start within a week's time. so, i think if you were looking for immediacy, like with the bank of japan, you may have been disappointed. bear in mind, that's where he's probably coming from in this speech today. >> all right. that's a fair point. kaori, thank you very much indeed for that. that's the latest from tokyo. but with terms like abenomics and abegeddon making the rounds, we want to know, what's your favorite or even most hated market buzz word at the moment? let us know. e-mail email@example.com, tweet @cnbcwex or @rosswestgate. keep our eyes on that. meanwhile, let's check in, if you just joined us today, on the state of the global markets. chloe cho kicks us off from singapore with this report. >> another negative session here
in asia with big losses piling up in japan, down 3.8%. much of this being blamed on disappointment over no surprises coming from abe's third arrow. there were plenty of numerical targets but no real tax relief as higher tax rates are set to kick in just under a year's time. pm abe is set to unveil more details next week and some more after upper house elections in july, yet, skepticism is already kicking in. also, we saw the bond yield rates go higher as well on the ten-year. remember, we have a 30-year debt auction tomorrow, and whether that sells off is going to be closely watched. greater china, also red arrows as well. we saw the shanghai market closing down five in a row, banks underperforming after state media reported that the top four loan growth for may was going to disappoint and fall behind figures as well. australia closing down 1.3%. >> so, that was the close in asia. right now u.s. futures are pointing to slightly more negative start for u.s. stocks, dow down 76 points yesterday. currently, futures 8 points below fair value.
the nasdaq 100 is currently, what, 2 1/2 points, 3 points below fair value and the s&p at the moment is some 2 points below fair value. european stocks have been down during the session. we had gains for the ftse up 33 points. currently we're down 31 points, but we had a very good services pmi out in the last half hour. just to recap that, 54.9, the expectation was 53. it's a trifecta of much better-than-expected pmis this week for the uk. most people now assume that's put a nail in the coffin, certainly in the near term, of any more qe from the bank of england. xetra dax is down a third. we had a reprint of composite pmis, 47.7, just like the flash. cac down 0.5%, the ftse mib up 0.5% at the moment. with the dollar/yen, following what's going on with mr. abe, we did get down to 99.49 a little bit earlier. we're currently at 99.84, a little bit up from that, and you heard there chloe talking about the weaker-than-expected
australian gdp, keeping the pressure on the aussie/dollar. sterling up at the highest of the day following services pmi 1.5355. as we look at asset prices here, we keep swinging around on fed talk. the dallas fed president, richard fisher, says the fed is poised to evaluate its bond-buying program and possibly make changes. speaking in toronto last night, he says the plot thickens and he likens developments in fed policy to a shakespearian play, starring ben bernanke as a daring captain steering the ship of the u.s. economy. he says act four is just beginning and it will involve the drama of introspection. fisher is, as we know, a longtime critic of qe-3, but he didn't repeat his call for the fed to cut back immediately on its asset purchases. at the same time, the deutsche bank co-ceo says the lender is prepared for an end to qe. speaking to cnbc at the global financial services conference in new york, he suggested the markets were already starting to normalize.
>> what you're referring to is the normalization of bond yields, which has been going on over the course of the last month and some of the softening in credit markets and so on and so forth, which i actually think is constructive. the reality is that at some point, the bond-buying program will come to to an end, and whet does, it will have an impact on the overall term structure of interest rates particularly. and so, you're seeing some evidence of that, but i wouldn't overinterpret that. >> what about the federal reserve tapering? i mean, this has become the new topic, and every day we get another headline -- oh, it will start in 2013, in 2014. what's your sense in terms of the impact on your business? when do you expect we see rates to actually really move in a sustained way? >> deutsche bank has a research forecast on this, maria. we are calling for higher u.s. growth than many of our peers. and as a consequence, we're also calling for an end to the bond-buying program as happening maybe as soon as the end of 2013, latest first quarter 2014. that's our official forecast. >> jain speaking to maria.
joining us exclusively for a half hour, howard marks, chairman of oaktree capital management. howard good to see you. >> thank you very much. >> thank you for joining us. do you agree that we're now seeing rates yields normalizing? are you comfortable with that? >> well, the economist herb stein said that if something cannot continue, it will end. we know that the stimulative actions qe has to end at some point in time. the only question is when. and i'm sure we're moving in that direction. we have not had a free market in money for a long time. we all think that one of the great things about our systems are that they have a free market, and a lot of people would like to get to a free market. i think it's desirable. the question is, can the economy withstand the withdrawal of all stimulus? so, push-pull, not an easy decision, but obviously, it will happen within the foreseeable future. >> are we getting ourselves in a bit too much of a twist on
deciding, you know, whether the exact when, whether we can cope with it, and you know, how much we start by? i mean, do these things -- i know they matter at the margin, they matter to a sentiment, but do they matter in the round? >> i think you're exactly right, these are not the important things. the important questions are what will the growth be over the next few years, not what happens tomorrow or what the response is. and i think that if we have a decent economy, we will have withdrawal of the stimulus, because it won't be needed as much, and we will have higher rates, because higher rates -- number one, rates are artificially suppressed, and number two, a strong economy is usually associated with rates higher than today's. >> so, what are you doing right now, then? i mean, are you taking a view that, actually, the economy is going to get stronger, therefore, i'm going to be less defensive, or are you saying there's so much uncertainty, actually, i'm going to not be -- i'm going to be more risk-averse? >> well, that's exactly the
right question any time, especially today. i think that today is still a time for caution. there are a lot of uncertainties in the world today, including the one we've been discussing. nobody knows how well the economies will do when the stimulus is removed. in the u.s., we have two steps forward, one step back. in europe, we have one step forward, one step back or worse. and yet, artificially low rates have artificially raised the prices of income-producing assets. that's a dangerous combination. and so, i think it's very important to not fail to be cautious today. and we are -- our mantra at oaktree is move forward but with caution. >> there's an interesting point. if we get normalizing yields because the economy's better, but asset prices, stocks have been boosted because of artificial yields from qe, that suggests a normalizing economy
may hit equity prices. equity prices aren't justified. is that what you're leaning towards? >> there's a lot of one hand, other hand stuff. on the one hand, higher rates would mean lower prices for income-producing assets. on the other hand, a strong economy would mean a good environment in which to invest and stronger company profits. so, balanced factors, that's why we're somewhat in the middle. it's not demonstrably a time to be either aggressive or highly defensive. move forward, but with caution. >> good to have you on, howard. you're staying around. i know you're over here on a bit of vacation, but we'll look at your view on, you know what the investments are in europe at the moment. i'm looking at reports that italian companies are going to be issuing a lot more debt rather than going to banks, and i'd be interested in your view of whether that's an investment case as well. howard marks, chairman and co-founder of oaktree capital management. if you have questions for howard while he's here, e-mail us
firstname.lastname@example.org. protests continue in istanbul for the fifth straight night as u.s. vice president joe biden has called for the government to respect the rights of those on the street. joining us now from istanbul, nbc's jim maceda with the latest. jim? >> reporter: hi, ross. well, the turkish government is meeting today, i think as we speak, with a group of protesters and academics to discuss the future of taksim square right behind me, which is at heart of this latest crisis. we'll see whether those talks help to cool things down. meanwhile, several trade unions and civic groups have joined a generalized strike in support of the protesters, and we'll also be watching what will happen there if that strike gains any traction. and while, as you can see, it's business as usual on the square, thousands filled into the fifth night running last night. we were out there. the atmosphere was really
festive, families getting together, lots of singing, lots of dancing, and overall, the good news is that while there were a few reported clashes between protesters and riot police, both in istanbul and other cities, there were no new reports of casualties, and the clashes do seem to have abated. now, this may have something to do with the government's apology yesterday. that apology not coming from prime minister tayib erdogan, who called protesters a fringe group, arm in arm, he said, with terrorists, but the deputy prime minister did publicly say that the riot police had overreacted, that the crackdown on protesters who really only wanted to protest against uprooting of trees in the square, was "wrong and unjust." still, some protesters told us that it really is too little, too late, that nothing less, nothing short of erdogan engaging with half of the country who just doesn't agree
with his policies will bring any real satisfaction to these protesters. ross, back to you. >> jim, thanks very much for that. nbc's jim maceda from istanbul. let's remind you what's on the agenda in the united states today. the may adp employment report is out at 8:15 eastern with forecasts for 187,000 in private sector payrolls. at 8:30, revised first-quarter productivity and labor costs. and at 10:00 a.m., it's the may ism services index and april factory orders. at 2:00 p.m., the fed releases its latest beige book report. as for earnings, look for reports today from brown-forman, maker of jack daniel's whiskey. some of you may know that. and homebuilder hovnanian. ♪
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meanwhile, record-low interest rates have forced some investors to explore new means of cheefg yield. european corporate bonds have benefited interest this trend with reports that hedge funds and money managers are pouring money into debt previously regards as two risky. howard marks is with us as well. we're talking about private equity. i also wonder, s&p is saying italian companies may double bond issuance to replace bank credit as well. i mean, is there going to be too much money, do you think, going into sort of middle yield or investment-grade corporate debt? >> well, it's a very important question, and the squibb you just had on the screen about the movement of money into debt and the chase for yield is very important. one of the great impacts of the government's efforts to minimize interest rates has been that it's very hard to make money in traditionally safe investments. you used to have the opportunity
to make return with income and now you have a choice, return or income. >> yeah. >> return or safety, i should say. and a lot of people have said i can't live on the return i attitudes get on treasuries, i have to go out the risk curve. and so, they have forced up the prices of riskier assets, which forces down their return. it's a real dilemma. >> it was extraordinary i think a month or so ago, i think, bp had a bond issuance yielding 2%. their stock was yielding 5%. >> exactly, exactly. >> extraordinary sort of world we're in. >> people today equate bonds with safety and income and that's what they want. >> okay. >> and they forget to say, oh, yes, but at what price? >> yeah, which is the key point. does that mean you actually are thinking more about, you know, how you spread your investments more now that there's more opportunity in private equity than there is sort of in investment-grade bonds? >> well, again, the challenge is what can you buy, you know? when i was a kid, i was a
terrible eater. i wouldn't eat anything unless it had ketchup on it, but if you put enough ketchup on it, i'd eat it. today, low interest rates make purchases of assets attractive, but the important question still is what are you buying, is it good and what price are you paying? and the mere fact that you can buy it with cheap money is not enough. so, i think it's very important that you -- >> we've been there before, right? >> we have been there before. >> right? buying cheap money and leveraging it up. >> that's what got the word into trouble in '05, '06, '07, and we don't want a replay of that. >> so, how are you approaching that, then, at the moment? i mean, how many -- can you find assets? yes, you can get the money. >> right. >> that's clear. can you find assets, though, that you want to own at the right price and growth? >> well, you can, but only a trickle. so, it's time again for caution and it's time to have funds of moderate size. you don't want enormous amounts of money to invest because you can't do it prudently today. and you have to always remember
that every good investment starts with a well-priced purchase, not with cheap money. >> does europe, in your view, offer more opportunity because of what's going on here than the united states in that sense, for the right buyer? >> for the right buyer under the right circumstances. since there is less uniformity of optimism here, and i have seen it's a very different story here from the u.s., where people are getting optimistic, and here there's quite a dearth of optimism. you want to buy when there isn't much optimism. that's a good thing. but you know, if the price of the asset embodies an assumption that there will be an improvement in gdp next year, well, that's not a cautious assumption, and you don't want to have to pay up for that assumption. >> fair enough. stick around. more to come from you, howard. also still to come, rebekah brooks, former boss of "news international," is in court today. we'll have the latest on the hearing. ♪
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how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪ the former chief of news corp. firm news international is in court today in london in charges related to the phone-hacking scandal. karen is at southwark court with
the latest. >> reporter: rebekah brooks arrived with husband charlie brooks, friend of the prime minister david cameron. i have to say, i tried to catch up with rebekah brooks on the way in and she looked like she had some form of trepidation in her eyes, natural considering the circumstances. she's facing three sets of charges today related to phone-hacking, but also unlawful payments to officials to access stories. so, proceedings have started a short time ago in the courtroom, but there are also nine other defendants today, including four former "news of the world" journalists and managing editors. so, this is the defunct newspaper that was closed down in the wake of revelations that it had hacked into the voice mail of the missing teenager, mili dahlia, who was missing in 2002. this caused a huge public fury in the uk, leading to the shutdown of the newspaper that had been in existence for 168 years, but it's curious. this is a very big tourist area, and so many people have been
coming up to us today saying what's going on in the courtroom? and we described the fact that it's rebekah brooks and it's related to the phone-hacking scandal, but tourists from germany, from the netherlands, from malaysia, have not even heard of this story. so, it's curious because this was front page in the uk and it is a very, very big story. we'll get to see today just how high up the allegations went into the news corporation organization. so, rebekah brooks is expected to enter either a guilty or a not guilty plea today. we should know that in a short amount of time, ross. >> karen, thank you very much indeed for that. still to come on the program, the world economic forum for east asia has kicked off in myanmar. unilever's chief operating officer speaks first to cnbc about the company's $650 billion investment. we'll be in the capital coming up. and we'll leave you with a look at where the futures are currently indicating the open. oh this is lame, investors could lose tens of thousands of dollars on their 401(k) to hidden fees.
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this is "worldwide exchange." a recap of the headlines today. shinzo abe's third arrow fails to hit a perfect bull's eye with investors. the nikkei tumbles on a well-flagged reform plan that's high on ambition but low on specifics. a top fed official says it's time for the central bank to re-evaluate its bond-buying program. richard fisher's comments come as the deutsche bank co-ceo tells cnbc it's preparing for the end of qe-3. >> we are calling for higher u.s. growth than many of our
peers, and as a consequence, we're also calling for an end to the bond-buying program as happening maybe as soon as the end of 2013, latest first quarter 2014. that's our official forecast. samsung wins the latest battle in its long-running patent fight with apple as a key u.s. agency slaps a ban on the import and sale of older iphones and ipads. and beijing strikes back at the eu over solar import tariffs, announcing an antidumping probe of its own into european wine. right at the close last night we had the first down day for the dow in quite a while. right now we're indicated negative at the start as well. the s&p 500 at the moment is about a point below fair value, not by much. nasdaq is currently less than a
point below fair value. and at the moment, the dow is actually trading on fair value. so, those futures are actually risen slightly in the last half hour or so. as far as the ftse cnbc global 300 is concerned, currently down 14 points, 0.25%. european markets have been a little mixed this morning. the ftse 100 was up 33 points yesterday. currently down 39 points but very strong services pmi. we've had a trifecta of pmis all better than expected. services side accounts for the far bigger part of the economy, 54.9 versus 53, strong numbers. and actually, we've had now good new orders as well and order backlogs rising for two months in a row, been a while since we've seen that. xetra dax is down, ftse mib up and the crack 40 down 0.4%. what are investors to do at this juncture in june? here's a recap of the thoughts of our guests already today on cnbc. >> you want to reduce your duration, but you still want to
maintain the carry that you're getting. so, the way that i see this is moving out of the carry trades into core markets and moving into periphery. you can preserve your yield, you can get a better volatility adjusted carry by being in, say, two-year italy and still have the same yield as ten-year bunds. >> what you have to keep in mind is, you know, as ross pointed out, you have to pick a level. at the moment, we're looking to buy fast retailing maybe a couple percent lower. it has had an aggressive move. we're trying to catch the bounces but on a very short-term basis. >> most assets are still going up. so, actually, we think that, you know, the skepticism towards that winddown is probably overplayed. and then on the other side, because i have a bullish view on equities, you know, i want to be exposed to wealth managers like that. >> all right, some thoughts
already expressed today. let's get a final thought from howard marks, chairman and co-founder of oaktree capital management, with us for the last half hour or so. howard, we're just having a discussion, just expand on this, because you're saying, actually, it's pretty hard to know what's coming in the future. and yet, you are managing clients' money for the future, so how do you do that? >> well, mark twain, the american humorist, said it's not what you don't know that gets you into trouble, it's what you know for certain that just ain't true. if you acknowledge your limitations on poor knowledge and you prepare for a variety of scenarios, you're unlikely to maximize if any one occurs, but you'll optimize over all of them and survive. when bruce karsh, my partner and i and the other founders of oaktree, set up the firm 18 years ago, we set forth an investment philosophy which does not stress forecasting, and we buy on the basis of value, but we also try to set up our
portfolios to avoid the losers and survive, thrive over a variety of scenarios. >> is it as much a focus on risk mitigation and value, those are sort of what you're looking at? >> very much so. so, we're micro investors. we're not guessing what's going to happen in the macro world tomorrow and try to make money from it. we're micro investors trying to buy the best values we can and the ones we can be most sure about. >> right now what are you most sure about? >> well, we like real estate. i think that real estate, not the best properties in the best cities, but the secondary and tertiary is our favorite asset class today. >> how would you get exposure to that? what's the best way for you to do that? >> well, for us to do it, we like -- we buy some buildings, we buy a lot of debt against buildings. the trouble with real estate is it's not very easy for the retail investors to participate. in our country, a lot of people have run through the reits to
get that participation, but of course, that has increased their price to the point where they may not be a bargain anymore. >> and your exposure is, are you looking at a particular -- i mean, obviously on the commercial space, but are you looking at a particular sector? are you office? are you storage? you know, how do you -- >> no, we're very opportunistic, very flexible, so we will by -- we like to buy the things that other people want to sell the most and not the things that we think are the prettiest. >> howard, good to have you on today. >> thank you. >> thank you very much for joining us. enjoy your trip here around europe. >> thank you. >> it's been a bit of a mix of business and pleasure. >> yes. >> but enjoy. great to have you on. thank you very much. >> thank you. >> howard marks, chairman and co-founder of oaktree capital management. now, samsung's put a check in the win column in its long-running patent fight with u.s. rival apple. courtney reagan has more at cnbc hq. courtney, it's a locng-running
battle, this one, but why is samsung going to win? >> this is an interesting one, ross, and i think it's still quite far from over. the international trade commissioner rules in favor of samsung in its patent fight with apple, saying apple infringed on technology involving the ability of mobile devices to transmit multiple services simultaneously through 3g wireless networks. the itc is slapping a ban on the import or sale of older apple products. that's the iphone 4, iphone 3gs, ipad 2 and ipad 3g, all made in china. it applies to those devices sold by at&t, the biggest u.s. seller of apple devices when samsung fooi filed its suit in 2011. while the products are more than a year old, some like the iphone 4 remain solid sellers, but it's likely apple will retire the iphone 4 when it releases a new version of the iphone 5 some time later this year. now, the ruling overturns a decision by itc judge james gildea, who ruled in september that apple didn't violate the patents in question.
samsung also accused apple of infringing on three other patents, but the itc found apple hadn't done so. president obama has 60 days to review the itc ruling and to decide whether to veto it. experts say if the import ban goes into effect, u.s. customs agencies could end up delaying other apple products. the iphone does account for about half of the company's revenue. even if president obama lets the ruling stand, the decision is still subject to a potentially prolonged appeals process which apple says it will pursue. so, we can see how shares are performing of both apple and samsung. both are lower on the session but not strongly so. it looks like samsung down by more than a percent, apple down by a little less than 0.5%, so there is still some room to go in this case, ross. it is not all settled. back to you. >> and the general fight, maybe they just go -- i don't know, do they just go and have a drink and settle it? they have an arm wrestle or something, you know? >> i mean, i don't think apple backs down from these fights and
i'm not sure how gentlemenly they handle anything, honestly. >> no, neither side is. it's just i fear we'll be talking about the apple/samsung battles for a long while to come. >> i know, for a long time. >> courtney, thanks for that. good to see you. have a good day. >> thanks, ross. elsewhere, consumer goods giant unilever is betting big on myanmar. after the break, we'll be out to the country's capital for a first on cnbc interview with the company's chief operating officer. [ male announcer ] i've seen incredible things.
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myanmar is shaking off decades of isolation with new political and economic reforms aimed at luring foreign investment, but as it hosts the world's corporate elite this week at the world economic forum, many are wondering whether the country's truly ready and open for business. our very own martin sung is live from myanmar's capital and is joining us for more. hi, martin. this is your third trip in weeks now to this previously closed country. what are your thoughts? >> reporter: good morning, ross. it's about 4:00 in the afternoon, just after 4:00 in the afternoon here where we are, and you're right, the world economic forum east asia kicked off earlier today. and you know, you and i have
covered meetings like this before, many of them, but what's unusual is this is not just in myanmar, this is in naypyidaw, which is the new administrative capital. and let me tell you a little bit more about it. it is a sprawling metropolis. it's actually bigger, covers more ground than the commercial capital yangon, what you and i used to know as rangoon. six-lane roads with little or no traffic, huge administrative buildings with very little in the way of people. it is really surreal, carved literally out of the jungle just a couple of years ago, and this is where the seat of government is right now. my thoughts. yeah, this is a good analogy, ross. this is surreal in a sense, it is as surreal as the rate and the pace of change politically and also economically that we've seen happen in myanmar in just the last two years or so, because remember, this place has been literally closed to the outside world for the last 60 years, since the military took over back in '62-'63, so what's
going on now is really unprecedented. people call this place a land frozen in time, but it is opening up, you're right, and this is exactly what people here at the world economic forum are talking about. more than 1,000 of them from academia, from business as well, from government, how to keep those reforms going, how to ensure stability here in myanmar, because in many parts of this country there is still a state of civil war ongoing with minority ethnic and religious tribes. many of them are narco states, remember, so that is very important to business and business confidence and making a decision to invest. as well, what we need to see here is for the progress in terms of democracy. so, a lot to be done, but the pot of gold at the end of the rainbow, 60 million people, probably more than that. the last census was done many years ago. per-capita incomes are low now, but with enough aid, with enough fdi, this could become one of southeast asia's powerhouse economies sooner than we think. one person keeping a very close eye on the changes happening here in myanmar is harish manwani. he is the coo, chief operating
officer at unilever, the world's number two consumer products company, the name behind brands like dove soap, like lipton's. and as you know, he joins us here live right now. harish, thanks for being with us and thank you for your time. >> good to see you. >> what is your message coming to this world economic forum? >> well, i think firstly, we are here in myanmar, as you've said. and without a doubt, this is an exciting opportunity for business. this is a 60 million population country, young, has had a closed economy, and as the sanctions have been lifted, there is a huge market that needs to be developed, and we are excited about being part of that journey. >> reporter: and you've just committed an investment. you opened a factory. >> we have actually commenced our operations here. we inaugurated our factory, which still has to start production, which will happen in the next few weeks. so, we are beginning to put, as they say, the plumbing, the wiring, and the infrastructure for doing business here.
>> reporter: fantastic. what are you going to be making for starters? >> well, we'll be locally manufacturing our seasoning por powder here, our chicken powder. it's a very popular brand in myanmar. and we have a whole bunch of other brands -- >> reporter: that's a soup you're talking about. >> yes, as you know, we make soup, a big part of that. and we have a whole other range of products that are very popular here, ranging from sun silk to clear shampoo, and -- >> reporter: here's the thing, many of these unilever brands you've just mentioned, they've actually been available in myanmar, even all through these years because of a lot of cross-border trade, some legal, some not, from china, also from thailand, because of course, myanmar shares contiguous borders with both. now that you're in here as a principal and making things directly and trying to sell to the myanmar people, is pricing going to be an issue? >> well, you know, our approach whenever we enter a market is really start with the consumer and see what is a value that we
can give them. so, if you look at our approach here, it's not about saying we're matching something or otherwise. what we're looking at is the affordability of our brands and whether they happen to be at the mass end or a little premium end, the question is -- >> reporter: which end is it? >> well, both ends, actually. if you take our brand called clear shampoo, it is pretty much at the mass premium end of the market, but we still make it in sections. we have a lot of learnings from developing markets in terms of how to have our brands accessible to our consumers. >> reporter: right, yeah. >> so, the number one brand in this market is clear because we've been marketing it at a price point that people can afford, but it is a great product. equally, we have a brand called sun silk, which is at a lower price. so, the whole idea here is to be able to make our brands accessible to as many people, as many consumers in myanmar as possible. >> reporter: harish, i want to ask you, i've spoken to people at coca-cola, general electric as well, and one of the big
things they're doing in addition to considering or actually committing capital is they are very big on corporate social responsibility, somehow helping development here in myanmar. is unilever considering something like that as well? >> absolutely. the heart of all our operations, particularly in our developing market, is what we call the unilever sustainable living plan. by the way, just to remind you, i talked about it several times, we want to double our business globally, but at the same time, reduce our environmental impact and increase our social impact. >> reporter: so, what are you doing here specifically? >> specifically in myanmar, for example, we were the first to start working with small farmers to source in a small way farm sugar for our operations in indonesia. okay? now, what we are doing is working with about 500 small farmers. we are in the process of scaling that up, because our model is exactly that, which is how do we really make sure that we can work within the communities and grow but grow responsibly.
>> reporter: okay, excellent. harish, we'll have to leave it there. thank you for joining us. appreciate it very much. have a great meeting here. >> pleasure being here. >> thank you. >> thanks. >> reporter: >> reporter: we've been talking to harish manwani, coo of consumer products giant unilever as our coverage of the economic forum in naypyidaw, myanmar, continues. ross, back to you. >> thank you very much for that. never live at myanmar before. still to come, a recap of the headlines. dallas fed chief fisher says it's time for the central bank to re-evaluate its bond-buying program. the japanese prime minister, shinzo abe's reform plan third abenomics arrow fails to impress investors, down nearly 4%. and samsung scores a victory in its long-running battle with apple. a u.s. trade panel ruling could block iphone 4 sales in its key markets. and still to come, investors will be searching for clues about friday's nonfarm payrolls report with the day's adp numbers, and how that may
influence what the fed does with qe-3 down the line. ♪ [ engine revs ] ♪ [ male announcer ] just when you thought you had experienced performance, a new ride comes along and changes everything. ♪ the 2013 lexus gs, with a dynamically tuned suspension and adjustable drive modes. because the ultimate expression of power is control. this is the pursuit of perfection. how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪
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♪ amazon is reportedly planning a major expansion of the online grocery business it's been developing for years. the company's been testing amazon fresh in its hometown of seattle for at least five years, and this delivers fresh food and produce with its own fleet of trucks. reports say it will now roll out the service in l.a. fairly soon, as soon as this week, and in san francisco later this year. if that does go well, amazon fresh could be launched in 20 other areas by 2014. the stock just up a third in frankfurt. argentina's supreme court has lifted a freeze on chevron's assets in the country, clearing the way for the company to go ahead with a shale oil venture with ypf. last year the judge ordered a freeze of up to $19 billion of chevron's assets as part of a
lawsuit by villagers in ecuador who say the company's responsible for contamination. chevron denied the charges and accuses the ecuadorian courts of fraud. chevron's stock down 0.5% in frankfurt. a reminder what's on the agenda today. we have the may adp employment report out at 8:15 eastern. forecasts are calling for an increase of 170,000 in private sector payrolls. at 8:30, we get revised first-quarter productivity and labor costs, at 10:00 a.m., ism services index and factory orders and at 2:00 p.m., the fed releases its latest beige book. quite a bit to chew through. joining us with his thoughts, paul blue, chief data and analytics officer at dunn and bradstre bradstreet. good to see you. >> good morning. >> in the ever ending debate about fed tapering, what's going to be most important for you in terms of today's data and how it plays in? >> well, obviously, we're going to look at payroll employment as we get to the end of the week.
that's the biggest number for us in the u.s. as we look at other global measures, we'll track other things, but certainly in the u.s., we're trying to get a read on payroll. there's lots of concerns that things have flattened out a bit in the second quarter. we don't fully subscribe to that. i think we'll get a solid number that confirms the 2% to 2.5% growth rate. >> equity players were kind of quite like steady, if unspectacular, jobs creation, because then they figure the fed will taper later and that will keep, you know, stocks fairly supported. do you think that's the trend that we're going to get? >> i think that's a trend we'll get for now. i think the fed will stay along their current course well into the fall and probably into early 2014. and then they'll shift to more of a neutral stance and we'll see how things go from there, but you're absolutely right. you get 165,000, maybe 185,000 payroll jobs, you get sub 2% growth in the second quarter but an underlying rate of 2% to 2.5%
growth. that keeps the fed engaged up until probably the back end of the year again and that's what equity markets appear to want at this time, although it's always a bit of a guessing game. >> yeah, it is. are we overdoing the -- look, i know, you know, we're very sensitive to each comment that comes out from different fed officials. are we sort of overdoing it slightly? because you know, whether we start tapering in september or november, does it actually fundamentally make a difference? >> well, no, it doesn't. it's a great question, because ultimately, the issue for the fed is not the tapering, it's the reversing of the aggressive stimulus that's been put in place by quantitative easing. and that's really a question probably 18 to 24 months from now. so, as the fed tapers off, we'll get a lot of headlines, we'll get a lot of overanalysis, but the big question is what does the fed do as we get into the middle to later stages of this decade. >> paul good to see you. thanks for that, joining us from dunham bradstreet. we're out of time.
coming up, "squawk box" and countdown to the opening of markets stateside. jeffrey katzenberg is here, dreamworks animation. we'll be on later. [old english accent] safe driver, multi-car, paid in full -- a most fulsome bounty indeed, lord jamie. thou cometh and we thy saveth! what are you doing? we doth offer so many discounts, we have some to spare. oh, you have any of those homeowners discounts? here we go. thank you. he took my shield, my lady. these are troubling times in the kingdom. more discounts than we knoweth what to do with. now that's progive.
good morning. today's top stories, japan's prime minister firing a third arrow today. and the markets were not impressed. it's the law of diminishing returns, right? the nikkei dropping to a two-month low. in the u.s., jobs in focus today. the adp employment report will hit the tape before the opening bell. it's wednesday, june 5th, 2013. and "squawk box" begins right now. ♪ i could turn this thing around at the next red light ♪ good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and scott wapner. andrew ross sorkin is off today. let's get right to the markets,
as it was another active session in japan overnight. the nikkei actually down by 3.8%. the volatility has been off the charts. this drop today came after a speech from prime minister shinzo abe. he pledged to boost incomes by 3% annually and to set up special economic zones for trying to attract foreign businesses. today's strategy announcement was his third measure aimed at boosting growth in the world's third biggest economy. the first two arrows, as abe calls them, first up was loosening monetary policy and then boosting public spending. investors seemed to be less than impressed by today's announcement, which was expected, but they were looking for some of the details there, and that seemed to be what was the disappointment. we'll have more from kaori enjoji in a few minutes, standing by in tokyo. meantime, if you look at the trading in europe this morning, there are red arrows across the board. weakest numbers coming in london with the ftse 100 down close to 0.9%. we will also check in with ross westgate in london if a few minutes, but if you want to see how it's a